It has become extremely common for couples to enter into prenuptial agreements which is formally known as a ‘binding financial agreement’. The idea of talking about the end of your marriage before it has even begun can be rather daunting and intimidating. While no one ever plans for divorce, it can happen.
What is a Prenuptial Agreement?
A prenuptial agreement is a legal agreement made between the parties in a relationship which outlines how their property and assets will be dealt with in the event of their relationship ending in separation or divorce.
Prenuptial agreements can be signed by couples before they get married. If one spouse has significantly more assets than the other, or their parents have businesses or inheritance that they wish to retain if the marriage ends, a prenuptial agreement can ensure that all of these assets are protected. It is also possible to enter into a prenuptial agreement after a couple is married. For example, if during their marriage, one of the spouses’ parents win the lottery, the parents may wish for the inheritance money to be passed down to their child only.
In June 2000, prenuptial agreements were officially sanctioned by legislation in Australia to enable couples to think about and plan their future rights and responsibilities through a binding financial agreement. The ability to sign a prenuptial agreement extends beyond marriage and is also open to de facto and same-sex couples.
What Do Prenuptial Agreements Cover?
Unfortunately prenuptial agreements are not romantic. They are a practical way of ensuring both partners are protected in the event the relationship does not work out. The terms of a prenuptial agreement can cover a wide variety of matters including:
- What assets are considered marital assets and what are non-marital assets. For example, the matrimonial home where the couple resides may be considered marital, but any assets bought by either partner prior to the marriage may be considered non marital.
- What assets will be divided and in what proportion in the event of a divorce.
- What will happen in the event of the death of one partner. In most states, your spouse will inherit a portion of your estate. If you do not wish for this to happen, this can be covered in the terms of your prenuptial agreement.
- Anticipated changes in the future such as children. A prenuptial agreement can cover whether the terms will change if children are involved, whether they are to inherit all of the assets, etc.
- A predetermined amount of spousal maintenance.
Prenuptial agreements do not cover custody of children or child support payments. Other provisions such as clauses about a person’s weight, frequency of sex, household cleanliness and infidelity punishments are sometimes included, but they are often deemed unenforceable. Prenuptial agreements are predominantly used for the financial arrangements of a couple.
How Do I Obtain a Prenuptial Agreement?
Australia has strict requirements for valid prenuptial agreements. If they are not drafted correctly, they may be deemed invalid by a court or completely set aside. For this reason, it is extremely important to engage a lawyer when drafting a prenuptial agreement. Spending a little money now is a much better option than engaging in litigation proceedings down the track for an invalid prenuptial agreement.
Can Prenuptial Agreements Be Set Aside?
Prenuptial agreements are generally legally binding. This means that if the agreement is signed by both parties, unless both parties mutually agree in writing that the agreement will no longer be binding, it remains binding on both parties. The other party can generally enforce its rights under the prenuptial agreement.
However, there are circumstances where the Family Court of Australia can set aside prenuptial agreements. These include:
- Non-disclosure of assets/ financial resources
- The Prenuptial Agreement was entered into under duress or involves unconscionable conduct
The Court may set aside your prenuptial agreement on the ground of children if your prenuptial agreement does not make any provisions for your children or if there is an adverse change in the welfare of the children and the prenuptial agreement would cause hardship.
- The contents of the prenuptial agreement are not just and equitable
There are various reasons why couples decide to enter into a prenuptial agreement. A prenuptial agreement is generally a great way to protect your assets, provide you with peace of mind and financial empowerment. However, as every couple is different, it important that both you and your partner freely discuss, agree and feel comfortable about the idea of a prenuptial agreement.
We cannot stress enough the importance of engaging a lawyer in drafting a prenuptial agreement. It is important to ensure that the agreement complies with all legal requirements so that you do not face invalidity of the agreement down the track. Our experts in family law are able to assist with these matters. If you would like to discuss your family law matter with a legal professional please contact us on (02) 9963 9800 or via our contact form.